Performance metrics

No single metric accurately captures the entire story or correctly provides the context for historical performance. Interactive Advisors provides access to a wide variety of strategies and investment methodologies and we believe in
equipping you with metrics that let you analyze the past performance of each strategy. We describe each metric, how it
is calculated and what it represents below.

Along with defining the metrics, we illustrate values by considering two hypothetical portfolios with the following
simulated performance:

Disclosure: The above chart is used for illustration and educational purposes and does not portray the results of any
portfolios available for investment on the Interactive Advisors platform or in the market generally. The returns
portrayed in the chart are not a reliable indicator of the performance or investment profile of any composite or client
account. The above simulated returns do not represent actual trading and may not reflect the impact that material
economic and market factors might have had on investments. The chart and corresponding metrics are used solely for the
purpose of illustrating and explaining the concepts discussed below. Any risk metrics discussed in this presentation are
for illustrative purposes only and do not represent the risk metrics of actual Interactive Advisors portfolios. The
risk metrics are presented for discussion purposes only and are not a reliable indicator of the performance or
investment profile of any composite or client account.

Time weighted returns

When measuring portfolio value, returns are simply the money gained or lost. We represent returns in percentage terms -
the ratio of the gain (or loss) to the total portfolio value. We provide returns over various trailing time frames.

For the hypothetical case:

Performance

Portfolio 1

Portfolio 2

Benchmark

Last 30 days

3.6%

3.8%

3.7%

Last 90 days

11.5%

-5.5%

4.4%

Last 365 days

32.3%

32.1%

15.7%

See metric disclosures below

Risk metrics

The following metrics are only computed when the portfolio has at least one year (365 days) of returns. Interactive Advisors
believes that the below risk metrics represent different measures of portfolio risk or portfolio
risk-adjusted returns.

Volatility

Volatility or standard deviation, a proxy for the riskiness of a portfolio, measures the fluctuations in the daily
returns.

Over the period under consideration, the two hypothetical portfolios achieve similar 365-day returns but follow very
different paths to get there, with portfolio 1 being less volatile than portfolio 2.

Portfolio 1

Portfolio 2

Benchmark

Volatility

20%

38%

11%

See metric disclosures below

Sharpe ratio

The Sharpe ratio combines the previous metrics to provide a risk-adjusted measure of portfolio performance. Since it is
a risk-adjusted measure, the Sharpe ratio can be used to compare various portfolios and strategies. The higher the
Sharpe ratio, the better the portfolio’s returns have been relative to the risk the portfolio manager has taken on.

Sharpe ratio =

365 day returns - Risk free rate

Volatility

Interactive Advisors uses the 3-month Treasury bill rate as a proxy for a risk-free rate.
For the two hypothetical portfolios above, these are the corresponding Sharpe ratios:

Portfolio 1

Portfolio 2

Benchmark

Sharpe ratio

1.5

0.8

1.2

See metric disclosures below

Sortino ratio

According to behavioral economics, humans are more affected by their emotions and subjective cognition. Unlike the
Sharpe ratio, which focuses on overall risk, some investors may want to evaluate portfolio returns for a given level of
downside risk as opposed to total risk (as upside risk can be beneficial to the investors). The Sortino ratio is
calculated by estimating the excess portfolio return over the risk-free return relative to its downside deviation (i.e.
standard deviation of negative asset return).

It is also a risk-adjusted measure and can be used to compare various portfolios and strategies. The higher the Sortino
ratio, the better the portfolio’s returns have been relative to the downside risk the portfolio manager has taken on.

Portfolio 1

Portfolio 2

Benchmark

Sortino ratio

2.6

1.2

1.4

See metric disclosures below

Capital preservation is always a key concern for investors and the following metrics offer a sense of the risk of
losses.

Maximum draw-down

Maximum drawdown is a measure of the maximum amount the portfolio lost over a specific time period. It offers investors
a worst case scenario but it is an incomplete measure as it does not tell investors what the other drawdowns were in the
period, what the frequency of the drawdowns is, how long it took for the loss to be recovered, or even if the loss was
recovered.

Portfolio 1

Portfolio 2

Benchmark

Max drawdown

9.1%

33.2%

7.4%

See metric disclosures below

Value-at-risk (95%, 1 week)

When making an investment choice, it is important for investors to have a first impression of the potential loss and the
probability of its occurrence within a pre-defined time frame. Value-at-risk is a forward looking metric that measures
the potential loss in value of a portfolio over a defined period for a given confidence interval.

However, for our calculations, we assume normal distribution probability which in reality may underestimate the risk
because it ignores all the extreme cases.

Portfolio 1

Portfolio 2

Benchmark

VaR

4.6%

8.8%

2.5%

See metric disclosures below

Additional metrics:

The following metrics try to capture an estimate of how much of the portfolio returns are predicted by the benchmark
returns and moves in the market as defined by the benchmark.

Information ratio

The information ration is another risk adjusted measure that aims to measure consistency in generating excess returns
above a benchmark. Mathematically, the information ratio is calculated as the ratio of excess portfolio return over the
benchmark return relative to tracking error. The tracking error is defined as the standard deviation of active return
(i.e., the difference between portfolio return and benchmark return).

Alpha

Alpha is a measure of the performance above what was predicted by the benchmark when adjusted for the level of risk
taken by the portfolio manager. It is a proxy of the benefit of the manager’s ability to deliver returns above that of
the market.

Alpha is not to be considered independent of Beta and R-Squared.

Beta

Beta is a historical measure of the correlation between the portfolio and the benchmark returns. It also helps
understand how volatile the portfolio is as compared to the market.

R-Squared

R-Squared is a measure of the part of the portfolio performance that is explained by the performance of benchmark.
Normally it is between 0% and 100%.

A R-squared of 100% indicates the performance of the portfolio can be fully explained by the benchmark. However, that
does not mean that the performance of portfolio is good or bad - one needs to use R-Squared in conjunction with Alpha
and Beta to get a more thorough picture of the portfolio selected.

Disclosure: These risk metrics are for illustrative purposes only and do not represent the risk metrics of actual Interactive Advisors portfolios. The risk metrics are presented for discussion purposes only and are not a reliable
indicator of the performance or investment profile of any composite or client account.

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